For sure, this article captured my interest. In some way, this is something I've been thinking of for a long time. The VC business is not scalable like a normal company, but you can't avoid that firms raise billions and hire hundreds of people to manage that capital. In this case, the problem is twofold:
For sure, this article captured my interest. In some way, this is something I've been thinking of for a long time. The VC business is not scalable like a normal company, but you can't avoid that firms raise billions and hire hundreds of people to manage that capital. In this case, the problem is twofold:
a) The more companies can stay private, hiding behind VC financing, the less they are incentivized to create a sustainable business and go public. That's bad for everyone: founders, investors, and the market.
b) When you have a multi-billion dollar fund to manage, you collect hundreds of millions in fees. In some way, carried interest becomes less critical, and the investor becomes a big corporation. VCs should remain agile and small startups. Sure, if you have $200M fund, you can invest in research and services--even if I don't believe in VCs as providers of services. Research and market reports are valuable internal assets, however. Fund's partner are another asset thanks to their experience as entrepreneurs.
Interestingly, the more the M&A market becomes regulated, the less high-tech companies will stay private. A startup should always aim to get an IPO in 7-8 years to create a healthy business. Founders seem not to understand that remaining private for way many years is not a good deal for them. You constantly live in a tutored environment, where your market cap is decided in a closed room, with no need to disclose your financial data to the outside world. Sooner or later, that becomes a problem.
For sure, this article captured my interest. In some way, this is something I've been thinking of for a long time. The VC business is not scalable like a normal company, but you can't avoid that firms raise billions and hire hundreds of people to manage that capital. In this case, the problem is twofold:
a) The more companies can stay private, hiding behind VC financing, the less they are incentivized to create a sustainable business and go public. That's bad for everyone: founders, investors, and the market.
b) When you have a multi-billion dollar fund to manage, you collect hundreds of millions in fees. In some way, carried interest becomes less critical, and the investor becomes a big corporation. VCs should remain agile and small startups. Sure, if you have $200M fund, you can invest in research and services--even if I don't believe in VCs as providers of services. Research and market reports are valuable internal assets, however. Fund's partner are another asset thanks to their experience as entrepreneurs.
Interestingly, the more the M&A market becomes regulated, the less high-tech companies will stay private. A startup should always aim to get an IPO in 7-8 years to create a healthy business. Founders seem not to understand that remaining private for way many years is not a good deal for them. You constantly live in a tutored environment, where your market cap is decided in a closed room, with no need to disclose your financial data to the outside world. Sooner or later, that becomes a problem.